Use the Correct Process for Financial Success in the New Year
If You’re Following a Faulty Retirement Plan, Now is the Time to Make a Change
The following is an excerpt from Momma’s Secret Recipe for Retirement Success, by Dan Ahmad, Jim Files, and Jack Canfield. Get your copy here!
Many retirees do not have their assets allocated properly to give themselves the highest probability that they can receive a high level of consistent income, will never run out of money for as long as they live, and will never suffer a big stock market loss like 2008 again.
In a previous blog, we described in detail the differences between Stage One of Retirement Planning – Asset Accumulation, and Stage Two of Retirement Planning – Income Distribution and Asset Preservation.
When you meet with your financial advisor, even after you’ve retired, the conversation will almost always be focused on your portfolio. Your advisor will likely talk about:
- The growth of your portfolio (even though it actually hasn’t probably grown much).
- How the market is doing “so well” and you need to ride the wave.
- How you are diversified by having your 20-30 mutual funds.
- Adding bonds to the portfolio, if you are worried about risk.
- How you are in it for the long-term and no matter what, you should “ride out all market volatility.”
- How they have the best money managers.
- How they will get you high rates of return.
- Maybe they will throw in some technical terms like alpha, beta, Sharpe ratio, and standard deviation.
- How it’s best to defer IRA distributions as long as possible, until age 72, to minimize income taxes.
The advisor might say you are now invested moderately, or conservatively, but they don’t define what this means in potential losses. So, your advisor says “moderate” or “conservative,” and you are thinking “low risk,” even though your current portfolio could lose -30%, -40%, or even -50% or more. The risk is likely caused by the portfolio’s primary focus on growth.